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HMRC Paper: Research and Development Tax Relief reform
01 August 2022 Andrea Marshall, Tax Specialist
HMRC have issued a Policy Paper entitled Research and Development Tax Relief reform. This sets out 3 key areas of change and will affect companies that carry out research and development and claim Research and Development (R&D) Tax Relief under either of two schemes — the Research and Development Expenditure Credit (RDEC) and the small or medium enterprises (SME) R&D relief.
The changes are:
Extending qualifying expenditure – this will include the costs of datasets and of cloud computing. The definition of eligible R&D will be extended to include pure mathematics. As the Health and Social Care Levy represents a new cost, sections of the R&D rules that currently refer only to ‘National Insurance contributions’ will be amended to also refer to the Health and Social Care Levy
Refocusing the reliefs towards innovation in the UK - relief for subcontracted work and the cost of externally provided workers will be limited to focus it on UK activity. There will be some narrow exemptions where factors such as geography, environment, population or other conditions that are not present in the UK are required for research.
Tackling abuse and improving compliance - all claims to the R&Dreliefs — either for a deduction or a tax credit — will in future have to be made digitally. Companies will need to inform HMRC, in advance, that they plan to make a claim. They will need to do this, using a digital service, within 6 months of the end of the period to which the claim relates. Companies that have claimed in one of the preceding three periods will not need to pre-notify. Claims will need to include details of any agent who has advised the company on compiling the claim.
Other minor changes are listed in the Policy paper.
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01 August 2022 
Andrea Marshall, Tax Specialist
